GOVERNMENT OF ANDHRA PRADESH

Irrigation & CAD (Maj: VIII) Department

Memo. NO. 28582-A/Maj.Irr.VIII(1)/08 Date: 07-11-2008
Sub: PCLIS-Incorporating the clause of price adjustment towards variations in the cost of E &
M and H & M components and its accessories and foreign Currency variation and other
clauses in agreement-Permission-Accorded.

Ref:- 1. From the Chief Engineer/PCLIS, Lr: NO.CE/PCLIS, dated. 16.10.2008
2. From the ENC (1W) Lr.No.ENC/TW/P&M/EE.1/DEE.8/300807/07, dated 22.10.2008
3. Minutes of the Meeting of the Advisors Committee held on 18.10.2008

1. Please refer to the Recommendations of the Advisors Committee dated 18
th
October 2008 vide
reference cited above

2. Government after careful consideration of the Advisors Committee recommendations agree for
inclusion the clauses in the agreements, as given in the minutes of the advisors committee
recommendations cited above, subject to the conditions as under.

Item No.1: Compensation towards variation in Foreign Exchange value.

The clause as approved in the minutes as referred above may be incorporated with all the
conditions as given in the minutes, provided that the contractor is liable to pay damages to the
Government that may be caused due to delay in delivery by agreed date given in the programme
and accepted by the department. This inclusion will be only in the agreements which are going to
be signed henceforth by the department.

Item No.2. Price adjustment to compensate the variation in price value of Electro Mechanical Items
and their accessories and Hydro-Mechanical Items and their accessories.

The recommendation of the Advisors committee is agreed to be incorporated along with all the
conditions mentioned in the minutes of the advisors committee referred above. The price
adjustment will be strictly as per IEEMA (Indian Electrical and Electronics Manufacturers
Association) Formulae as suggested by the Advisors committee. The recommendation of the
advisors Committee for this item will be only for agreements to be signed henceforth by the
department.

Item No.3 Interest on Mobilization Advanced:

Government agreed to the recommendation of the Advisors Committee in not accepting a fixed
rate of interest for mobilization advance and agree with the Finance department suggestion to adopt
rate of interest as given by the Finance department. However, the waiver of interest clause in view
of the extension given due to the delay on the part of government due to land acquisition or forest,
environment clearness, etc, shall be incorporated.

Item No.4(A) Payment schedule of Electro- Mechanical Equipment and works & Item (B)-Payment
schedule for Hydro-Mechanical Equipment and works.

Government agreed as recommended by the Advisors Committee subject to the condition to make
sure that the prorate percentage proposed for Supply at site and Election testing and
commissioning area far below the true value attached to the components, so that sufficient
security is available in the hands of the Government.

Item No.5-Earth Work Excavation for Pump Houses, Surge Pool and Tunnel.

Government agreed as recommended by the Advisors committee subject to the condition to ensure that
there is no front loading.
Item No.6-Maintenance after Defect Liability Period.

Government agreed as recommended by the Advisors committee.


3. The Chief Engineer, Pranahita- Chevella Lift. Irrigation Scheme shall take further necessary action in
the matter accordingly and incorporate suitable clauses in agreements to be signed for Pranhita-
Chevella LIS project as recommended above on all items keeping in view conditions imposed by the
Advisors Committee and agreed by the government.

4. The Engineer-in Chief (IW), Hyd is informed that the recommendations of Advisors Committee are
applicable to all agreements except item I & II which cannot be applied for ongoing projects. Chief
Engineer, EnCs implementing projects under Jalyagnam are permitted to enter into supplementary
agreements to give effects to the above instructions for item 3, item 4, item 5 and item 6 only for
ongoing projects and item 1, item 2, item 3, item 4, item 5 and item 6 to be incorporated in all
agreements to be signed henceforth.

5. This Memo issued with concurrence of the Finance (W & P) Department vide their U.O.NoSP
13596/F4 (1)/08-1, Dated. 04.11.2008 and U.O.No. 4754/F4 (1)/08-1. Dated. 05.11.2008.


ADITYA NATH DAS
SECRETARY TO GOVERNMENT
To
The CE, PCLIS, Hyd
Copy to:
All Engineers-in-Chief, Irrigation & CAD Dept.,
All Chief Engineers, I & CAD Department.
SC/SF

// Forwarded By Oder//
SECTION OFFICER

Minutes of the meeting of the Advisors committee held on 18-10-2008 at 3.00 p.m in the
chambers of Engineer-in Chief (AW), CAD Department, Jalasoudha Building, Errum Manzil,
Hyderabad.

Members Presents:

1) Sri B. Rosaiah, Advisor on Andhra Projects
2) Sri. Y. Lavakusha Reddy, Advisor on Telangana Projects
3) Sri T.S Prakasa Rao, Advisor on Rayalaseema Projects
4) Sri. M.K Rahaman, Engineer In- Chief (A.W) Member Convener
5) Sri B. Mallakarjuna Rao, Chief Engineer, Pranahitha Chevella LIS.
6) Sri G. Adi Seshu, Director, Hydal, AP GENCO, Special Invitee.

AGENDA ITEM

Pranahitha Chevella Lift Irrigation Scheme- Incorporating the clauses of price Adjustment
towards variations in the cost of E.M and H.M components and its accessories and Foreign
Currency variation and other clauses in Agreement.

The Pranahitha Chevella L.I Scheme envisages lifting 160 TMC of water from River Pranahitha with
26 Nos. Of lift locations. The required pumps and motor are of high discharge and high head
specifications. The equipment required for EM & HM works are to be imported. As such the payments
are to be made in Euros/ Dollars which are varying with foreign exchange rate day to day.

The Chief Engineer Pranahitha Chevella L.I Scheme, reported that the bidders M/s Andriz ABB, the
foreign pumps and motors manufactures had IV partnership and participated in the bids.

A representation from the Agencies, viz, BHEL is received stating that two clauses namely Foreign
exchange variation clauses and price variation clause for Electro- Mechanical and Hydro-Mechanical
components and their accessories are to be incorporated in the Agreement as the payments are to be
made in Euros/ Dollars which are varying with the foreign exchange rates day to day. Similarly the
cost of raw material like steel, copper and aluminium are fluctuating a lot and the agreement period is
48 months. The Agencies also represented for modification in payment Schedule for Electro-
Mechanical and Hydro-Mechanical items, Earth work Excavation in pumps, Surge pools and Tunnels.

The Chief Engineer, Pranahitha Chevella L.I Scheme, requested the Government for necessary
permission to refer the matter to the Advisors committee vide Lr.No. CE/PCLIS, Dated 16-10-2008.

Government in in Memo No.28582-A/Maj.Irr.VIII (1)/08, dated 16-10-2008 directed to refer the
subject matter to the Advisors Committee for its recommendations to Government.

Regarding inclusion of (i) clause for payment of adjustment towards variations in Foreign exchange
for machinery and equipment imported from other counties, (ii) Price adjustment clause for Electro-
Mechanical equipment, the Advisors Committee opined as follows.

On perusal of Minutes of pre-bid conference, it is observed that, the issue was raised by some bidders
including BHEL and the superintending Engineer/Chief Engineer clarified that no payment for price
adjustment on Electro-Mechanical component and fluctuation in Foreign exchange rate would be
allowed. Under the circumstances, the Advisors committee observed that inclusion of the said clauses
in the agreement at this stage involves additional financial commitment.

However, in view of the representations from the successful bidders, if the above clauses are to be
incorporated in the agreement, it requires specify approval of the Government.

In respect of inclusion of above Clauses in the Agreement the following procedure may be adopted.





Item No:1
Compensation towards variation in Foreign Exchange value:

The committee considered the compensation towards variation in Foreign Exchange rate and
recommended the procedure to be followed is as follows if Government agrees.
i) Foreign exchange component breakup is to be obtained within 30 days from the date of conclusion
of Agreement
ii) Name of country from which proposed to be imported and the Currency in which payments to be
made should be obtained.
iii) Tentative programme for importing the Equipment as per Milestone Programme
iv) The Price Adjustment is valid only during subsistence of Agreement.
v) The base date for calculating the Payment of compensation towards variation in foreign exchange
rate will be taken as the last date of submission of Bid and the date on which price Adjustment is to
be calculated shall be the date of invoice.
vi) This compensation/recovery is to be affected for the variation beyond 5%

Item No.2
Price Adjustment to compensate the variation in price value of Electro Mechanical Items and
their accessories and Hydro-Mechanical Items and their accessories.

The Committee discussed in detail and recommended to make, the price Adjustment if the price
variation is beyond 5% on the basic rates of Electro Mechanical Items and their accessories and
Hydro-Mechanical Items and their accessories with the following conditions.

i) Basic Rate is considered as the rate prevailed as on the date of Bid submission.
ii) For indigenous equipment, Price variation will be calculated as per IEEMA formulae. The whole
sate price indices for required materials should be obtained from the O/o the economic Advisor.
Ministry of industries, Government of India as circulated by IEEMA (Indian) Electrical &
Electronics Manufacturers Association)

For Imported equipment, the amount paid as Consignment Insurance & Freight (CIF) for project
site will be taken into consideration adopting the IEEMA formula duly obtaining the price indices as
published in LONDON METAL EXCHANGE RATE.

Item No.3
Interest on Mobilization Advance:

The Advisors committee opined that the issue of Interest on Mobilization Advanced May be as
per the approval by the Government of Andhra Pradesh from time to time.

The Above advance shall bear borrowing rate of Interest as approved by the Government of A.P
from time to time. The interest on the amounts paid as advance is chargeable from the date the amount
is paid. However if completion is delayed by circumstances beyond control of the contractor for which
an extension has been granted by the Executive Engineer/Superintending Engineer the interest charges
on such advances shall be waived for the period of extension.

The Mode of Recovery of Mobilization Advance shall be as per Govt. Memo.No.
22500/Reforms/2008-1 Dated. 20.08.2008.

Item No.4
Payment Schedule:

A) The Advisors committee opined that the payment schedule of Electro-Mechanical equipment and
works consists of cost of equipment, erection, testing and commissioning.

Hence the committee recommends the payment schedule for Electro-Mechanical works follows

i) 85% of the quoted price of Electro-Mechanical works component of supply of goods (for price
including all taxes and duties) shall be paid on receipt of Goods at the project site based on
certificate prepared by engineer-in-charge and Suppliers Representative on the basis of various
items received in accordance with the contract Agreement.
ii) 10% the quoted price of Electro-Mechanical works component shall be paid on reaction, testing
and commissioning of equipment, on pro rage contract value of the work completed as per the
agreed construction schedule and on certification by the Engineer-in-charge and Suppliers
Representative.
iii) Balance 5% of the quoted price of Electro-Mechanical works component shall be paid at the time
final bill.

B) The Advisors committee recommends the payment schedule for Hydro-Mechanical Equipment
and works is as follows

i) 85% of the quoted price of Hydro-Mechanical works component for supply of goods (for price
including all taxes and duties) shall be paid on receipt of Goods at the project site based on
certificate prepared by Engineer-in-charge and suppliers Representative, on the basis of various
items received in accordance with the contract Agreement.
ii) 10% the quoted of Hydro-Mechanical works component should be paid on erection, testing and
commissioning of equipment on prorate contract value of the work completed as per the agreed
construction schedule and on certification by the Engineer in charge and suppliers Representative.
iii) Balance 5% of the quoted price of Hydro-Mechanical work: component shall be paid at the time of
final bill.

Item No.5
Earth Work Excavation for Pump House, Surge pool and Tunnels:
The Advisors committee suggested to adopt the following procedure for payment of earth work
excavation for the following components of works.

I) Pump House and Surge pool:
Normally berms are formed at 5m depth for Deep cuts. Payment for Excavation may be made for
every 5m of depth of cutting as a unit (i.e. between berm to berm)

II) Tunnel:

Payment for Excavation may be made considering 25m length as a bay unit for finished item.
Similarly for lining also 25 m bay length may taken for payment.

Item No.6

Maintenance after defect liability period

The Advisors committee recommends for conclusion of separate O & M Agreement for civil works
and Electro Mechanical & Hydro-Mechanical works after the Defect Liability Period.

The Agreement shall be finalized by the Department keeping in view the following suggestions.

i) Advisors committee opined that the spare parts mentioned in the list of Bid document are to be
supplied by the Agency within agreed date of Original Agreement.
ii) The materials (Spare parts) supplied by the manufacturer along with the equipment will be the
property of the department.
iii) Any spare parts required for maintenance of system are to be supplied by the Agency during the
Defect Liability period at his own cost.
iv) Cost of supply of spare parts required during maintenance Period and not mentioned in the Bid
Document (Beyond Defect Liability Period) will be borne by the Department.